Friday, April 15, 2016

Federal Government Charges Higher Graduate Student Loan Interest Rates To Subsidize And Lower College Student Loan Interest Rates

From The Wall Street Journal, Real Time Economics, "Clinton and Sanders Say Student Loan Rates Are Too High; Here’s What’s Going On" by Josh Mitchell:
Is the Government Profiting From Student Loans?

It depends on the math.

The government uses an accounting method that differs from that of private lenders, and under that accounting method, it books a profit. But using the private sector’s method, student loans lose money.

Even under the government’s accounting method, it loses money on undergraduate student loans. It does, however, book a profit by lending to graduate students and parents, who pay higher interest rates than undergraduates. Essentially, the government is taxing graduate students to subsidize undergraduate students. [Emphasis added.]

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